Alaskans Keep Industry-Friendly Oil Tax

With his landmark tax legislation expected to survive Tuesday night's vote, Gov. Sean Parnell says it's now time for the oil industry to increase its investment in oil field projects that create jobs for Alaskans.

As soon as he saw Senate Bill 21, or the More Alaska Production Act, was winning decisively Wednesday morning, Parnell began to get excited about the potential opportunities for Alaskans, he said in a press conference Wednesday afternoon.

"Immediately what came to my mind is it's now time for companies to put their money where their mouth is, move those billions of dollars into work for Alaskans, and I began to get excited about the potential for Alaskans," he said.

Also Wednesday afternoon, Vic Fischer, co-chair of Vote Yes! Repeal the Giveaway, said his side had lost the election but not the larger battle.

"Let's put it this way: We're conceding the referendum election is over," said Fischer, who had been traveling throughout the day to attend a wedding in the Lower 48. "The numbers are not likely in our favor, and we might as well relax and enjoy ourselves. But we don't look at it as defeat."

Importantly, the election makes it clear that the "people of Alaska understand who owns the oil and that they need to get a decent share of the profits on our oil," Fischer said. He added that many volunteers in the campaign plan to keep a close eye on oil field activity.

Although at least 14,000 absentee ballots will not be counted for days, the repeal referendum known as Ballot Measure 1 was losing by 6,880 votes Wednesday afternoon, a 4.46 percent margin. The referendum sought to repeal the tax cut known as Senate Bill 21 and replace it with its predecessor, Alaska's Clear and Equitable Share.

With all 441 precincts reporting, 80,508 votes against the measure had been counted, with 73,628 cast in favor of the initiative. If all absentee ballots sent to voters are returned completed, the total of absentee ballots would rise to 21,767.

Parnell said he does not consider the outcome close, though it was tight enough for a while to cause anxiety on both sides of the issue. Asked if he had a timeline as well as production and revenue benchmarks to determine if Senate Bill 21 is working or is a failure, Parnell said he had no timeline but added that it's already begun to work, and that he's heard from hundreds of Alaskans getting new jobs or new job opportunities.

"I think it ought to be given time to work, and the testimony was it will be about three to five years, and I think some of the voters as well who weighed in on the 'no' side ... we're willing to say, 'Let's give this a chance.' We saw the production decline under ACES, and it's time to give another vehicle a chance."

ConocoPhillips has said it has added two rigs to its North Slope operations since the passage of Senate Bill 21 and that it has invested in a third rig, a new one, with Doyon, the Native regional corporation for Interior residents.

But big projects await approval, including the Greater Mooses Tooth No. 1 in the National Petroleum Reserve-Alaska and $3 billion in projects in Prudhoe Bay's west end, which BP has said could lead to first production in 2018. Oil company officials have said Senate Bill 21 makes approval for those projects more likely.

Early Wednesday, the margin was large enough to prompt Vote No supporters to declare victory.

"Yesterday, Alaska voters made a choice to keep tax reform and give it a chance to work," said a statement sent by Willis Lyford, a Vote No on One spokesman.

Lyford said the remaining absentee ballots are expected to favor the Vote No camp, in part because of the sizable number of Republicans who had requested absentee ballots and would presumably vote no.

"There are sufficient results in at this point that we think they'll hold off and our margin will probably increase," said Lyford.

The Vote No campaign saw massive spending provided mainly by the biggest beneficiaries of the tax cut -- BP, ConocoPhillips and Exxon Mobil Corp. -- while the effort to "repeal the giveaway" was funded primarily by small donations, with more significant support coming from former grocer Barney Gottstein.

T.J. Presley, campaign manager for Vote Yes! Repeal the Giveaway, noted that industry vastly outspent the measure's proponents, plunking down more than $14 million to defend the tax cut compared to the $628,600 Vote Yes raised to reinstate the former tax law.

Presley also said he was disturbed at how the Vote No side had, he said, swiped a key message from Vote Yes, running an ad close to the day of the primary that Presley said echoed messages used by the Vote Yes campaign.

"With $15 million, you can sow a lot of confusion," Presley said. "How many people saw that ad -- 'Who do you trust? Vote no on 1' -- and were confused? I know our message was good, but you didn't have to steal it."

The spending for every "no" vote amounted to more than $170. Every "yes" vote, by comparison, cost about $8.60.

Lyford said Vote No came from behind during the course of the campaign that began last year, with the two sides moving into a dead heat around March, and Vote No later pulling ahead in part because voters were beginning to accept factual arguments that Senate Bill 21 had created new opportunities and jobs, versus the other side's emotional claims that Senate Bill 21 was a giveaway and that the oil industry could not be trusted.

"From our standpoint, how we defined the issue resonated with people," Lyford said. "Did we have more money? Yes. Is money a guarantee of victory? One hundred percent no."

Lyford said the Vote Yes side ran a "spirited" campaign and promoted their vision effectively. But their attacks on the oil industry hurt their cause.

They're so passionate, "they lose sight of how real people think about things. They spent a lot of time demonizing the oil industry -- profits are evil, don't trust them -- and I don't think people buy those arguments."

Sen. Bill Wielechowski, perhaps the most visible supporter of the Vote Yes argument after appearing in numerous debates, said the Vote No side will win.

"It was their final argument of 'Give it a chance,' " he said, that helped sway voters.

It didn't help supporters that initiatives were removed from the ballot that would have drawn out more liberal voters, including one for marijuana legalization and another that could hinder the Pebble mine prospect. Those, along with the minimum wage initiative, will be voted on during the November general election.

"Their side had unlimited money to start with, they managed to get the initiatives off the ballot, and they had a motivated Republican primary," Wielechowski said. "It was a perfect storm."

Still, he said, he is optimistic. During the campaign, oil company officials promised increased activity in the oil patch, making statements they did not make during the legislative discussion that led to the passage of Senate Bill 21, he said.

Also, many Alaskans are now educated about the oil industry and how the state's oil-production tax works. They'll be watching to make sure industry's claims of more production will be realized.

"The important thing is we got a lot of promises of more money to the PFD, more jobs for Alaskans, more production," Wielechowski said. "If they live up to those promises it's good for us and good for the oil industry. If they don't live up to them, we have an army of Alaskans who are ready to hold the politicians and oil companies accountable."

BP Alaska Regional President Janet Weiss said the company will do its part to make sure that "oil-tax reform" continues to work.

"Alaskans have made clear they are interested in moving forward and improving Alaska's long-term economic future," Weiss said. "We agree with the voters that oil tax reform is working, and BP is committed to doing its part to make sure that continues."

The state now expects that earnings from the Constitutional Budget Reserve in 2016 will be about $357 million. How long the account might last after that will depend on oil prices, state spending and tax policy.
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